Bad Credit History

How do you know?

It’s a common story. Your car fails its pink slip or you want to buy a new sofa suite for the lounge room and you apply for a small loan from the bank to cover the extra cost only to find your application is rejected. Why? Apparently, you have a bad credit rating, though this is the first you’ve heard of it. What does it mean and how did it happen?

What is a bad credit rating?

We go through life making credit contracts as a matter of course. If you have a credit card (and many of us have 3 or 4), have taken out a mortgage or have agreed to a mobile phone plan, then you have signed a credit contract, whether you realized it or not. Credit is simple - you get what you sign up for as long as you meet the repayment schedule on time. If you start to default on your repayments it will be noticed and your lender, be it a bank or a retailer, will try to find out what the problem is and work out a solution with you. However, if you continue to miss payments your borrowing record will be marked and this is the start of a bad credit rating.
You may think that it won’t matter; that you’ll just approach another bank for a small loan to pay off the first, they won’t know about your bad credit rating, will give you the small loan you’re seeking and all your financial problems will be over. Sadly no. There are businesses who make a very good living from running credit checks for banks and retailers on potential customers and who will report back to any prospective lender that you have a bad credit history. Suddenly, applying for small loans, or any type of credit at all, becomes very difficult.

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Bad Credit Loans

So where does this leave you? You need a small loan to cover your outstanding debts, get yourself back on your feet and ultimately, to pay for the car repairs that began this whole drama. However, you’ve just discovered that you have a bad credit rating and your bank won’t touch you. What can you do? The answer may well be to approach a non-conforming loan lender as, in this country, they are the group of lenders who pick up the bad credit loan business. One of the easiest ways to move forward with a bad credit loan is to seek a secured loan from a non-conforming lender. Under the terms of a secured loan, additional money is borrowed against a piece of collateral, such as a home, vehicle or business. The obvious negative points of this method of borrowing are that firstly, you need something to offer as collateral to start with and if you are in debt, you may not be in that lucky position. Secondly, that if you fail to meet the repayment conditions of this new non-conforming loan, you could lose your house, or even your livelihood if the lender takes your business. Having said all that, a bad credit loan can be just type of small loan that you need to get you through a financial rough patch. And if it isn’t, there are many other small loans out there which maybe more suitable. Whatever, you decide to do, if you are thinking about taking out a small loan it is always best to seek financial advice first to make sure you have considered all the options available and found the one that is most appropriate to your particular situation.